Staffing agencies have a month-end problem that most businesses don't: the month ends on a Wednesday, payroll runs weekly, and the hours your contractors worked on Monday through Wednesday haven't been billed or paid yet. If your books ignore those three days, every month's profit is wrong by a few days of business, and which few days changes every month.
This checklist is built around that problem. Follow it in order. The first section matters most.
New to staffing accounting? Start with our staffing agency accounting guide. For the general close, see the month-end close checklist.
Before day one: set your close calendar
Pick a target: books closed within 10 business days of month end is a sensible goal for most agencies, and faster is possible once the routine is set. See how long month-end close should take.
Write down who does each step and by which business day. For example:
| Business day | What gets done |
|---|---|
| Day 1 to 2 | Timesheets locked, billing and payroll tied out |
| Day 3 | Bank and card reconciliations |
| Day 4 to 5 | Accruals and payroll liabilities |
| Day 6 to 7 | Receivables review, placement fees, other balance sheet accounts |
| Day 8 | Review and reports |
| Day 10 | Owner meeting, period locked |
Step 1: Lock the timesheets
Everything in staffing flows from approved hours.
- Make sure every timesheet for the month is approved by the client (or flagged as disputed).
- Export the hours report from your timekeeping or front-office system: worker, client, hours, bill rate, pay rate, week ending date.
- Note any weeks that cross month end. Those need the split in Step 3.
Why first: if hours change after you close, revenue and payroll cost both change, and you'll be re-closing.
Step 2: Tie hours to billing and payroll
This is the three-way match at the heart of a staffing close:
| Check | Should equal | If it doesn't |
|---|---|---|
| Approved hours × bill rates | Invoiced revenue for those weeks | Missing invoices, rate errors or unbilled hours |
| Approved hours × pay rates | Gross pay from payroll for those weeks | Missing timesheets in payroll, or pay rate errors |
| Hours billed | Hours paid | A worker was paid and not billed (lost margin) or billed and not paid (a problem waiting to happen) |
Run this by client. Differences of a few hours are common. Differences of a few hundred hours mean something broke.
Step 3: Accrue the hours that straddle month end
When the last week of the month crosses into next month:
- Accrue unbilled revenue. Hours worked through the last day of the month that you'll invoice next month: hours × bill rate. Debit Unbilled Receivables, credit Revenue.
- Accrue unpaid wages. The same hours × pay rate, plus an estimate for employer payroll costs and workers' comp. Debit Direct Labor (cost of revenue), credit Accrued Payroll.
- Reverse both entries on day one of next month, so the actual invoice and payroll record normally.
QuickBooks Online lets you set a journal entry to reverse automatically. Our guide to accruals and prepaids explains why accruals make monthly profit meaningful.
Step 4: Reconcile payroll
Weekly payroll means four or five payroll runs per month, plus the provider's fees and any corrections.
- Reconcile the payroll bank account (or the payroll debits in operating checking).
- Tie gross wages in the books to the payroll provider's register for the month. Our payroll reconciliation guide shows how.
- Clear the payroll clearing account to zero, or explain what's left. See payroll clearing account.
- Review payroll liabilities. The balance should equal what's actually owed to the payroll provider and benefit providers right now. Old balances that never clear mean entries were posted wrong.
- Split payroll between field workers (cost of revenue) and internal staff such as recruiters and admin (operating expenses). If recruiter salaries sit in cost of revenue, your gross margin per hour is understated.
Step 5: Workers' comp and other per-hour costs
Many staffing costs scale with hours or wages: workers' comp premiums, benefits, background checks. At month end:
- Accrue workers' comp based on the month's wages and your rates, if the insurer bills later.
- Compare the accrual to the actual bills when they arrive and adjust.
Getting these right matters because they're part of your true cost per hour.
Step 6: Bank, card and payment reconciliations
The usual close steps, done every month:
- Reconcile every bank account and credit card to the statement.
- Reconcile any merchant or payment accounts.
- Review uncategorized transactions to zero.
Step 7: Receivables review (and factoring)
Staffing agencies pay workers weekly but often wait 30 to 60 days to get paid. Receivables are your cash.
- Run the A/R aging by client.
- Follow up on anything past terms. Note any disputes about hours.
- Review whether any old balances need a reserve or write-off, and agree it with the owner.
- If you factor invoices: reconcile the factoring account to the factor's statement. Record advances, reserves held back, fees and rebates in their own accounts. Factoring fees are a real cost of the business and should show up on the P&L, not disappear into the bank balance.
Our guide to accounts receivable for small business has collection tips.
Step 8: Placement fees and guarantees (for recruiting and direct hire)
If you charge fees for permanent placements:
- Record placement revenue when the candidate starts (or as your contracts define it).
- If your contracts include a guarantee period (a refund or free replacement if the hire leaves early), estimate a reserve for expected refunds, based on your history, and review it monthly.
- Track recruiter commissions owed on placements made this month, and accrue them if they're paid later.
Step 9: Other balance sheet accounts
Walk the balance sheet line by line. Every account should have a reason for its balance:
- Prepaid expenses (insurance, job board subscriptions paid annually)
- Accrued expenses (bills for this month not yet received)
- Loans and credit lines (tie to lender statements)
- Owner accounts
Then lock the period in QuickBooks with a closing date so nobody changes it by accident.
Step 10: Report what matters
A staffing agency owner needs more than a standard P&L. Add:
| Report | What it shows |
|---|---|
| Gross margin per hour, by client | Bill rate minus fully loaded pay rate, so you know which clients are worth it |
| Gross margin %, total and by client | Overall pricing health |
| Billable hours, month over month | Volume trend |
| DSO (days sales outstanding) | How fast clients pay |
| Revenue concentration | Share of revenue from your largest clients |
| Payroll as % of revenue | Early warning on pricing or overtime |
Our article on staffing agency financial KPIs explains each one and how to read it.
Common staffing close mistakes
- No month-end accrual. Profit swings depending on which day the month ended.
- Hours paid but never billed. Lost revenue that nobody notices until year end.
- Recruiter pay in cost of revenue. Gross margin looks thinner than it is.
- Factoring fees netted out of deposits. The real cost of financing is invisible.
- Payroll liabilities that never clear. A sign entries are being posted wrong every week.
When to get help
Staffing is one of the hardest businesses to close well, because hours, billing and payroll all move every week. ABFI's recruiting and staffing accounting clients get this close every month, with a controller review of the timesheet tie-out, accruals and margin reports.
Comparing tools first? See the best accounting software for staffing agencies.
Keep reading
Sources
- Intuit, QuickBooks Online Help, search "reversing journal entry", quickbooks.intuit.com/learn-support. Checked November 6, 2026.
- Financial Accounting Standards Board, ASC 606 Revenue from Contracts with Customers overview, www.fasb.org/page/PageContent?pageId=/projects/revenue-recognition.html. Checked November 6, 2026.
Questions owners ask
How do staffing agencies account for unbilled hours at month end?
Accrue them: hours worked through month end × bill rate as unbilled revenue, and × pay rate (plus payroll costs) as accrued wages. Reverse both on day one of the next month.
What's a good month-end close timeline for a staffing agency?
Within about 10 business days is a sensible target for most agencies. Faster is possible once timesheets, billing and payroll tie out cleanly every week.
Should recruiter salaries be cost of revenue?
Usually no. Field workers' pay is cost of revenue. Recruiters, sales and admin are operating expenses. Mixing them distorts gross margin.
How do I account for invoice factoring?
Keep the factored invoices, advances, reserves and fees in separate accounts and reconcile them to the factor's statement monthly. Fees go to the P&L as a cost.
What's the most important staffing KPI?
Gross margin per hour by client, because it tells you which work actually pays.
Want a close that ties hours, billing and payroll every month?
ABFI closes staffing and recruiting books monthly with the timesheet tie-out, accruals and margin reports built in. Start with a complimentary Business Accounting Diagnostic.